Why Americans Are Broke, And Getting Further In Debt

http://www.zerohedge.com/news/2013-01-15/why-americans-are-broke-and-getting-further-debt#comment-31

Just as the president reminded us yesterday we are not a deadbeat nation, merely borrowing money today to pay the bills of yesterday, so, as the NY Times reports in this all-too-real article, many of the citizens of the US are also living not just paycheck-to-paycheck but short-term-loan-to-short-term-loan. As one debt-consolidation service noted "They've been borrowing just to meet payments on previous loans; it builds on itself." Rings an awfully loud bell eh? (and yes, we know the government's finances are not run like a households - though at some point the check book needs to balance). People in tough 'economic' situations fall into the 'poverty trap', borrowing money at ever higher interest rates in a shell game to keep previous borrowers at bay. The average debt for households earning $20,000 a year or less more than doubled to $26,000 between 2001 and 2010 - as people dig deeper, precisely because they long to escape. As the focus of the article notes, "the belt-tightening was the easy part... the larger problem was cash-flow." Critically, experiments show that 'economic' scarcity by itself - independent of personality or any other factors - fuels a drive to borrow recklessly.

When all the worlds wealth is concentrated in the hands of the few, this is the end result. History always repeats itself.